Regional Differences and the Minimum Wage

Minimum Wage

The fight for 15 rages on.

As control of the House of Representatives moves to the Democrats for 2019, the party is as centered as ever on boosting the federal minimum wage from $7.25/h to $15/h. Although it likely would not be passed with a Republican Senate and White House, the Democratic House has made minimum wage legislation a priority early on in the new session.

Ever since 200 fast food workers walked out in protest of wages being too low in New York City, progressives have made a national $15/h minimum wage a policy priority. The movement has gained traction in pockets throughout the country, with California, New York, and Massachusetts along with various cities, such as Seattle, all passing $15/h wage legislation.

With the primary goal of this push being a $15/h federal minimum wage, it is important to consider the varying impacts of this wage benchmark across the country, namely with the different levels of purchasing power an individual has based on where they live. The goal here is to demonstrate some simple ideas about how far varying wages can go in different parts of the country.

Living Expenses: Massachusetts to Idaho

Nothing affects an individual’s purchasing power more than the cost of living for where they call home. In a country as large and diverse as the U.S., living expenses vary enough to have a significant role in the debate about the federal minimum wage.

The number 1 variable in people’s living expenses has to do with that cozy plot of land where you call home. With housing expenses accounting for roughly 35% of a household’s expenditures, even small changes in rents and property values can have an impact on how far someone’s income can go.

Other expenses like gas and food vary by region as well, but housing costs will be the central focus here due to its major contribution to an individual’s expenses.

Seeing how the Massachusetts minimum wage just increased to $12/h to start 2019, the bay state can help serve as an example.

According to data from appartmentlist.com, the average rent for a 2-bedroom apartment in Boston was $2,090 in December 2018. Assuming there is a person in each room, that would be $1,045 each.

The city of comparison here will be from quite a distance away in Boise, Idaho, where minimum wage sits at the federal $7.25/h level. Average rent for December 2018 in Boise came in at $1,048 for a two-bedroom unit, or $524 per person assuming again that two people live there.

So how far can a minimum wage job get you in these two cities? Assuming the person works 34.5 hours per week (the national average), the Boston resident will earn roughly $345 per week, or $1,380 per month, after taxes. If they live in that average Boston apartment with a roommate, they are spending roughly 76% of their monthly income on housing.

For the Boise resident, the 34.5 hour work week will yield them about $215, or $860 per month, after taxes. To rent that average apartment with a friend, the resident will have to spend roughly 61% of their income on housing.

With this simple estimate, the Boise resident would be better off even with a far lower wage. Even at the full $15/h minimum that will come over the next few years, the Boston resident would earn only about $1,718 per month. That same apartment would cost them 61% of their monthly income, which would be the same percent as the Boise resident earning less than half as much per hour.

To have a more complete analysis, the next largest expense, food, could also be added in. According to Numbeo, the monthly average food cost per person is $246.80 in Boise and $395 in Boston. Adding these numbers to the average apartment cost with a roommate, the Boise resident earning $7.25/h would spend about 90% of their monthly income on food and housing, while the Boston resident at the future $15/h wage would spend about 84% of their income on the same two categories.

Rough But the Big Picture

This is by no means a complete analysis of the cost of living and the minimum wage of these two cities. Someone earning at the wage floor likely would not live in the average apartment of a given city, and may very well be receiving some form of government assistance. There are also many more expenses on top of just housing and food.

This comparison should provide some food for thought, however, in regards to an across-the-board wage hike. There are plenty of other metro areas with low costs of living like Boise where a $7.25/h or even a $10.00/h wage goes much further than in places like Boston.

With such large state-to-state disparities, minimum wage hikes may be better off staying in the 50 state legislatures, rather than going through the U.S. House.

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